Financial Literacy & Community Banking Projects The Parkdale branch Cash & Save in Toronto’s inner-city. Photocourtesy By Jerry Buckland & Rick Eagan of the Royal Bank of Canada.
The concept of financial adults on low-income) who don’t have one means to overcome this challenge. literacy has come into vogue in bank accounts and instead rely on fringe Situated financial education is a benefit banks– cheque cashers, pawnshops, etc. that community banking is singularly policy circles in Canada as well – for their financial services. well-positioned to offer. as the U.S., U.K., and Australia. People who are“financially literate” This article describes four community The sub-prime financial crisis have the knowledge, skills, and attitude banking projects in Canada that we have and the consequent global about daily and longer-term finances tracked over the past four years.1 Each is necessary to maintain or promote their unique. Three projects – the Cash & recession are recent events that financial well-being. How do people gain Save, the Community Financial Services demonstrate the importance of this financial literacy? For some, financial Centre, and Pigeon Park Savings – are financial literacy – not just for literacy is something learned in a housed in one or two outlets. One the“consumer,” but for the“busi- classroom, in household management project, Desjardins Mutual Assistance courses, for example. But for many Fund, involves a counselling service with ness world,“ and government. people, financial literacy is gained right an emergency loan that is available When sub-prime mortgages are where one lives and works. It happens in through participatingcaisses populaires . written in ways that attract your daily life through the institutions – Note that we do not hold that consumers who cannot sustain family, neighbourhood, banks, and community banking projects by government agencies– that they rely on. themselves are sufficient. Building them, the financial literacy of It is asituated learning experience. financial literacy and financial inclusion businesses and banking clearly In an inner-city location, with few must go beyond small-scale projects. It has to improve. mainstream banks and a proliferation of requires that lessons from innovative fringe banks, people rely primarily on models be integrated into large, main- This article, however, is about con- family and friends for their financial stream financial institutions. Of course sumer financial literacy, and particularly literacy. Fringe banks do not provide the financial literacy must be reinforced how and where it can best be delivered to savings, credit, and financial education through other institutions such as the financially excluded. They are the 3% services that mainstream banks offer. schools, community organizations, and of adult Canadians (and 8% of Canadian Community banking projects present businesses as well.
makingwaves vol. 20, no. 3 (supp) 65 Pigeon ParkSavings, in downtown Vancouver. Photo courtesy of VanCity Savings Credit Union.
Profiles of 4 Community transfers, and money orders. With the savings. First-time clients drawing Banking Projects provision of adequate personal identifi- welfare benefits are able to use photo- cation on the first visit the client copied ID verified by their welfare All the neighbourhoods in which these identification is placed on the computer office. In fall 2007, PPS had 4,200 four community banking projects are system so that ID is not required for members. located have been affected by contempo- future visits. The Community Financial Services rary changes associated with economic The Cash & Save deliberately seeks Centre (CFSC) is a pilot project of restructuring, but each has a unique to employneighbourhood residentsand North End Community Renewal history. All are located in large urban encourages them to pursue training in Corporation (a community develop- centres inner-cities. They are adjacent to orderto gainpromotioninto RBC’s ment corporation), developed and the downtown and are characterized by regular branch network.Financial implemented in collaboration with more of the challenges associated with sustainability is a key goal of the Cash Assiniboine Credit Union (ACU). poverty (higher rates of unemployment, & Save business model. However, one CFSC accepts clients who are referred poor housing, mental illness, and informant indicated that RBC does not to it from community partner agencies. racism) than other neighbourhoods. expect theCash and Saveto generate The project offers a number of financial The relative affordability of housing in the level of profits other RBC units services to the working- and welfare- these neighbourhoods, and the social generate. poor so they may develop a relationship services established there in response to Pigeon Park Savings (PPS) is with a mainstream bank. Services seasonal and precarious employment located in the centre of Vancouver’s offered include free CFSC photo opportunities, has also made these areas Downtown Eastside. It is a project of identification; access to an ACU destinations for waves of newcomers to Portland Hotel Society Community account; assistance in applying for direct Canada. These neighbourhoods exist Services Society and Vancity Savings deposit; free on-site cheque-depositing within a larger urban development Credit Union. PPS is a single outlet and cheque-cashing at ACU branches context of increased income and racial that is open to anyone and primarily with no holds;2 and optional one-on-one concentration, polarization, and serves neighbourhood residents. PPS financial counselling, including assis- segregation. offers a simple account that includes tance in creating a credit history. CFSC The Cash & Save is a service centre unlimited transactions (either in person plans to offer group-based financial of the Royal Bank of Canada (RBC). or ATM), counter cheques, bill management training in the future as The name is intended to highlight the payments, direct deposits, and money well. The ACU member can select a centre’s focus on low-fee cheque-cashing. transfers for a $5 monthly flat fee. It basic savings or chequing account with It has two outlets in inner-city Toronto, offers a $20 overdraft for members 30 free transactions per month. As of one in the Parkdale neighbourhood and experiencing special needs. The June 2008 the CFSC had 153 clients. another in Regent Park. The Parkdale overdraft comes at no charge and The Fonds d’entraide Desjardins outlet opened in October 2002 and the requires the member to apply to the (Mutual Assistance Fund) is one of Regent Park outlet one year later. They manager. For no additional charge, PPS several solidarity products offered by the offer basic financial services, including will also provide members with an Desjardins Credit Union Federation. cheque-cashing, bill payments, money additional account that can be used for Others are Microcrédit Desjardins aux
makingwaves vol. 20, no. 3 (supp) 66 enterprises (loans for small business) and importantly from the financial literacy enhance their budgeting plans. From a Créavenir Desjardins (loans for young perspective, there are neither develop- situated learning perspective, these two people). The Mutual Assistance Fund got mental services (savings and credit), or projects are more likely than PPS and the started when Desjardins set aside information about these services. Cash & Cash & Save to foster greater financial $500,000 for loan capital. The aim is to Save can refer interested clients to a literacy. assist people experiencing financial nearby RBC branch, but clients do not difficulties by means of financial regularly make this request. In Conclusion counselling and access to small emer- The PPS set of services is also gency loans of $500-$1,000. The loans transaction-oriented but includes greater No doubt given the complex nature of are provided at a low or no interest rate scope of development services, relative to our financial system improved financial to people otherwise unable to access Cash & Save. First, PPS will provide literacy is needed today: for consumers, credit. interested clients a second account that businesses, and government. Financially The project involves the federation, a they can use for savings. Second, PPS excluded people can also benefit from Pigeon Park Savings, in downtown local caisse populaire, and a credit counsel- offers a $20 overdraft. (It is not clear if financial literacy. But for this to happen Vancouver. Photo courtesy of VanCity ling agency.The budget counselling repayment performance on the overdraft effectively, much must occurin situ , and Savings Credit Union. agency refers clients to the program, does is reflected in the client's credit report. If for this process to be undertaken the pre-lending counselling, and monitors so, this would add a further developmen- expansion of mainstream bank networks into low-income neighbourhoods to service low-income people is critical. Community banking projects can contribute to this, both in the services that they deliver and by influencing the For financially excluded people to benefit from financial way mainstream banking is delivered. For literacy, much must occurin situ , through the expansion of financially excluded people who are mainstream bank networks into low-income neighbourhoods. looking for improved financial advice and services, the Desjardins and CFSC Community banking projects can contribute to this, both in projects seem to offer the greatest the services that they deliver & by influencing the way potential. mainstream banking is delivered. References
1 For more details on these programs, see Buckland 2008,“Community Banking Projects for Low- income Canadians: A Report Examining Four repayment. In 2008 the Mutual tal service.) Thus, to the extent that the Projects to Promote Financial Inclusion,” available Assistance Fund was operating in 28 existence of the service can lead to at
The Cash & Save provides a set of that involve the client working with a JERRY BUCKLAND is Professor of International transactions services such as cheque- budget or financial counsellor. Thus the Development Studies at Menno Simons cashing and bill payment. It does so at a client has access to a full set of College, Winnipeg. Contact him at [email protected]. RICK EAGAN is the fee that is lower than fees at many other transactional and development financial Community Development Coordinator at St. cheque-cashers. These services can assist services plus access to financial counsel- Christopher House in Toronto. Contact him at clients to reduce their financial service ling. Clients in these programs can access [email protected]. costs. However, the services are still more transactions services to meet immediate expensive that comparable services needs, work on credit and savings plans, available through a bank branch. More and work with a budget counsellor to
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